Women in Informal Employment: Globalizing and Organizing

• Global Trade
• Organization and Representation
• Social Protection
• Statistics
• Urban Policies
• General Activities

• Street Vendors
• Waste Collectors
• Home-Based Producers
• Garment Workers
• Domestic Workers

New Study on the Global Economic Crisis No Cushion to Fall Back On: The Global Economic Crisis and Informal Workers. To address the gap in information about the impact of the crisis on the working poor, WIEGO and its partners in the Inclusive Cities project collected information on the impact of the crisis on three categories of these workers - home-based workers, street vendors, and waste pickers. Read more

The global financial crisis has precipitated a global economic recession with significant impacts on employment – and workers - around the world. Policy makers and the media have begun to focus on the employment effects of the global crisis. But the attention is largely on rising unemployment among formal salaried workers. Relatively little attention is paid to whether informal firms and informal workers are affected by the crisis, including the impact of new entrants into the informal economy.

This is because there is a common misconception that the informal economy serves as a cushion for formal workers who lose their jobs. While it is the case that employment in the informal economy tends to expand during economic downturns, this does not mean that those working in the informal economy necessarily thrive. In fact, economic downturns often affect the informal economy in the same ways as they affect the formal economy. Like formal wage workers, informal wage workers face loss of jobs or (further) informalization of their employment contracts.

 

Much like formal firms, informal firms are affected by the drop in demand, fall in prices, and fluctuations in exchange rates associated with economic crises. Unlike their formal counterparts, however, informal firms and informal wage workers have no cushion to fall back on and, therefore, no option but to keep operating or working. As once-formal workers or formerly unemployed persons crowd into the informal economy, the net result is that more-and-more firms or individuals begin competing for smaller-and-smaller slivers of a shrinking (informal) pie.

With members and partners around the world, WIEGO has begun tracking the impact of the global economic crisis on the working poor, especially women, in the informal economy. The data presented below are largely from Ahmedabad, India supplied by the Self-Employed Women’s Association (SEWA) which was the first organization to begin studying the effects. The data will be undated in June 2009 when evidence from other countries becomes available. Links to the findings from other studies are also provided.

1. Waste Recycling

The first sector in which we saw a marked drop in demand and prices was the waste recycling sector.  It is estimated that 1-2 per cent of the urban population of the world lives off collecting and recycling paper, cardboard, plastic, glass, and metal waste.  Many of the waste pickers who do the primary collection and sorting earn very little: many of them are women and children.  There has been a significant downturn in the market and prices for recyclable waste around the world, beginning in September or October 2008.   An article in the New York Times dated December 7, 2008 highlighted the situation with the headline “trash has crashed”.

The major cause for this dramatic downturn is the drop in demand from Asia, especially China, for raw materials and packing materials.  The drop in demand for manufactured goods from developed countries led to a decline in exports of manufactured goods from developing countries which, in turn, led to a decline in demand for recycled waste materials and a drop in the selling price of waste. The net result is that tons of waste materials are accumulating on streets or in warehouses, containers loads of waste are stockpiling at harbors.  More and more waste is going directly to landfills and incinerators without being sorted for what can be recycled.  And large numbers of waste pickers around the world are earning significantly less or facing loss of livelihoods.

Here are figures supplied by the Self-Employed Women’s Association (SEWA) of India on the drop in prices of different types of waste between October 08 and January 09.

Other sectors which have experienced a downturn and in which they are large concentrations of informal workers include:

• export manufacturing
• construction
• export commodities

---

Here is a summary of the information that we had been able to compile as of end April 2009:

2. Export Manufacturing

The financial crisis, and the decreased incomes and increased uncertainties associated with it, have resulted in a major downturn in trade.  The transmission mechanisms are quite clear: decreased incomes and increased uncertainties in the global North - decreased consumption which has led to decreased demands for imports - major downturns in export manufacturing in countries around the world - massive lay-offs and/or restructuring of the workforce.  China, the “factory of the world”, has experienced massive lay-offs in the garment, toys, and electronic sectors, especially in the Pearl River Delta region.  But China is not the only country affected by the decreased demand from the global North for manufacturing goods.  Most countries around the world, especially those that relied on exports, have felt the downturn in trade.  

• India: massive lay-offs in some sectors (diamond polishing) + less secure contracts in other sectors (textile/garments)
• Lesotho: decline in aggregate demand for clothing and textiles from USA

Much of the global workforce in export manufacturing is informal, including: wage workers without legal or social protection in factories and small workshops; industrial outworkers producing for export and being paid by the piece; and some self-employed producers.  Factory and other wage workers are losing jobs or having their contracts restructured (fewer hours and benefits, fixed term).  Industrial outworkers are receiving fewer or smaller work orders: some have had existing orders cancelled or simply not been paid.  Those who supply raw materials or accessories for export manufacturing also face declining work orders or cancellation of existing orders,

Consider the example of industrial outworkers in the garment sector in Ahmedabad, India.  According to figures provided by SEWA, between November 2008 and January 2009, garment outworkers experienced a decline in days of work and earnings, as follows:

November 2008	January 2009
100% - > 20 days of work	69% - >20 days of work
100% - earned >1000 rupees p.m.	50% - earned >1000 rupees p.m.

3. Construction

The construction industry is expected to experience a significant downturn over the next several years even in countries which increase government spending on infrastructure.  One dimension of this downturn is that the decline in remittances will mean a decline in construction of private residences.    Between November 2008 and January 2009, women construction workers in Ahmedabad, India experienced a decline in days of work and earnings, as follows:

November 2008	January 2009
80% - >10 days of work	23% - no days of work
20% - <10 days of work	67% - < 10 days of work
125-150 rupees p.d.	90-120 rupees p.d.

4. Export Commodities

In regard to export commodities, both exports and prices were expected to fall significantly during 2009.  Recent evidence from Eastern Africa, for example, indicates a decrease in exports of cotton from Tanzania and decrease in price of coffer in Ruanda.  The decline in commodity exports and prices will affect many small farmers and producers.

In brief, the global economic crisis is impacting the informal economy in many of the same ways that it is impacting the formal economy.  Informal wage workers face loss of jobs or further informalization of their contracts.  The informal self-employed face decreased demand, falling prices, and fluctuations in exchange rates, interest rates, and prices.  The informal workforce, as a whole, faces increased competition from the new entrants into the informal economy and has no cushion to fall back on.

What can and should be done to address the impact of the global recession on the informal economy? 

• Emergency Relief Measures: There is a growing consensus in the international community that emergency cash transfer programs and public works are needed to help the working poor, and the poor more generally, survive the crisis without further impoverishment.  There is scope for targeting these emergency measures to specific groups of working poor who are in particular danger of losing their sources of livelihood.
  
  
• Sector-Specific Rescue Plans: Specific bail-outs or rescue plans should bedeveloped in consultation with different groups of working poor that would help them maintain existing employment opportunities during the crisis or secure new employment opportunities after the crisis.  Waste pickers need access to waste and space for sorting and storing waste.  Construction workers need skills training.
  
  
• “Do No Harm” Measures:  During the crisis, the laws, rules, and regulations that prohibit or undermine livelihoods of the working poor and the policy biases that favor formal firms and workers over informal firms and workers should be suspended.  Most notably, perhaps, urban regulations and planning that ban street vending or deny waste pickers access to waste should be suspended.
  
  
• Longer-Term Window of Opportunity: The global financial and economic crisis has spurred a call for rethinking economic models and policies.  This rethinking should include rethinking of the mainstream economic approach to the informal economy.   The goal of “formalization” should be to increase earnings and reduce risks of the working poor in the informal economy, not simply registration and taxation of informal enterprises.  Formalization should have three “pillars”: appropriate regulation and fair taxation; legal and social protection; and measures to increase earnings and productivity.   Further, the working poor in the informal economy need to Visible in economic statistics and policies, have a Voice in economic decision-making, and be seen as having Validity, or legitimacy, as economic agents and targets of economic policies.

More Information on the Global Economic Crisis

For additional evidence on the impact of the global economic crisis on the informal economy, and suggestions regarding how to respond, see:

Link:
StreetNet’s WCCA Campaign Page

Challenge for state as recession cuts a swath through jobs, By Neva Makgetla, Business Day News, South Africa

Ravi Kanbur of Cornell University, a well-known economist and Member of WIEGO, has written and spoken about the current crisis and other crises and the need for systemic rethinking on how to protect the poor during crises.  Please see the following links for what he has to say on this important topic:

The Crisis, Economic Development Thinking, and Protecting the Poor, Ravi Kanbur.
Presentation to the World Bank's Executive Board, July, 2009.

The Co‐Evolution of the Washington Consensus and the Economic Development Discourse, Ravi Kanbur. August 2008.

Systemic Crises and the Social Protection System: Three Proposals for World Bank Action, Ravi Kanbur. April, 2009.

Provisional Record 10:
1) speech by Pat Horn, WIEGO Member (see pp. 10/50, 10/51).

2) Speech by Hildegard Hagemann makes a strong case for C177 (see last speech in report).

Maintaining Productive Employment during Times of Crisis, A one-day workshop held at the World Bank, April 2009.

website | video sessions | presentations

Chintan. May 2009. Scrap Crash! What the crash in prices of scrap means for wastepickers and other recyclers.

Bailing out the World’s Poorest, Martin Ravalion. October 2008. The World Bank Research Development Group, WPS 4763

The Global Economic Crisis: Challenges for Developing Asia and ADB's Response, May 2009. Asian Development Bank (ADB).

OECD Employment Outlook 2008. Organisation for Economic Co-operation and Development (OECD).

Asian Youth Driven to Informal Sector, by Cai U. Ordinario, Business Mirror.
May 31, 2009

Download flyer for distribution:
English | Español

News Section on the Informal Economy

top of page

---

Print this Story